Introduction / Glossary

What is AAVE:

AAVE is a decentralized finance protocol that allows users to borrow and lend their assets and use flashloans. Flashloans are loans that are borrowed and repaid in the same transaction. When you borrow you are able to obtain moving or working capital without the need to sell your assets. It is great for dealing with expenditures or leveraging other assets for new investment opportunities. If you are a lender then once you have deposited your assets, to help create liquidity, you can earn from the interest paid on the loans and the percentage of the flash loan fees.

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Metrics / Methodology

In this dashboard we are going to dive into a couple different topics.

1. First we are going to look into lending rates for at least 5 token in AAVE v2 and then see if there is correlation to the total amount being lent over time to the price of AAVE

2. Then we will look at WBTC and similar information specifically on just WBTC

3. Then we will analyze the volatility of rates and analyze the correlation between WTBC total lending and USDC borrowing rates

4. To do all of this we are going to be looking into the market stats table in AAVE and specifically making sure that we are looking at AAVE v2

   1. We will then be looking at different totals to see what we can learn about certain rates of different tokens analyzed to try and find trends and relationships among the data
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Lending / Supply Rating Analysis

1. These graphs are going to look at the different lending rates for 5 different tokens that are LINK, USDC, USDT, DAI, and WETH

2. WETH and LINK seem to have the most consistent lending rates as they do not really change the line that they are in, however, when you look at the different stable coins there is a pretty large range between .3 - .03 roughly.

3. The average supply and lending rate for the stable coins are also by far the highest coming in at:

   1. Supply / Lending

      1. DAI: .04 / .07

      2. USDC: .04 / .06

      3. USDT: .05 / .08

         1. These rates are far higher than the rates of LINK and WETH
         2. This is most likely due to the variability in price of LINK and WETH making lending or supplying those assets more risky whereas stable coins value are not going to change

4. There is also a strong correlation between the price of AAVE decreasing and the stabilizing of the different rates

   1. LINK and WETH were very stable during this time table, but as the value of AAVE decreased it is very noticeable on both scatter plots that the USDC, USDT, and DAI dots began to form a line which would indicate much more consistency than had originally been seen during the beginning of 2021.
   2. There is also a high correlation between the amount of money being lent and the drop of price in AAVE

5. WETH , USDC, and DAI had the most lent out

WBTC Analysis

1. The total amount of WBTC that has been lent out on AAVE v2 has been over 16 trillion USD

2. The total amount being lent has followed a similar path as the others tokens analyzed have as AAVE’s price decreases so does the total amount being lent out

3. The WBTC lending rate has been very consistent over time except for one spike, which is very similar to LINK and WETH and the average lending rate for WBTC comes out to .00659, which is .6%

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Volatility / WBTC and USDC Correlations

1. There was a decent amount of volatility when it came to the different lending and supplying rates for USDC at the beginning of 2021, but as the beginning of May 2021 the rates began to stabilize.
2. There is a direct correlation between the stabilization of rates and the amount of WBTC being lent along with the amount of USDC being lent as well
3. There is no correlation between the WBTC lending and supply rates to the total amount of USDC or WBTC being lent
4. On May 6 2021 the total amount of WBTC being lent hit an all time high and that is in the middle of the stabilizing of the lending and supplying rates of USDC

Conclusion

1. Stable coins have higher supplying and lending rates than more variable tokens do

2. The volume of lending on AAVE has a high correlation to the value of AAVE

   1. As the price goes down so the does the total amount people are lending

3. On AAVE v2 there has been over 45 trillion USD of WETH borrowed

4. WBTC follows a similar pattern of lending to the other tokens analyzed as the price of AAVE falls the total amount lent out follows as well

5. The stabilizing of the USDC rates has a direct correlation to the amount of WBTC being lent as the most money being lent from WBTC correlates to the time when the rates of USDC were consistent and not volatile.